Information Technology and Administrative Efficiency in U.S. State Governments - A Stochastic Frontier Approach

60 Pages Posted: 21 May 2010 Last revised: 22 Dec 2014

See all articles by Min-Seok Pang

Min-Seok Pang

Temple University - Department of Management Information Systems

Ali R. Tafti

University of Illinois at Chicago

Mayuram S. Krishnan

University of Michigan, Stephen M. Ross School of Business

Date Written: May 19, 2011

Abstract

This paper aims at exploring value creation from information technologies in governments. While the majority of studies in the information systems discipline have focused on discovering IT business value in for-profit organizations, the question of whether the performance effect of IT exists in the public sector has not been extensively studied so far in either the information systems or public administration literature. We examine whether IT improves administrative efficiency in U.S. state governments. Utilizing the IT budget data in state governments, the census data on state government expenditures, and a variety of information on public services states provide, we estimate technical cost inefficiency, an inverse proxy for administrative efficiency, with a stochastic frontier model. Our analyses provide evidence for a significantly negative relationship between IT intensity and cost inefficiency. Our results indicate that all others being equal, on average, a $1 increase in per capita IT budget can lead to $4.18 efficiency gains. This study contributes to the IS literature by expanding the scope of IT value research to the public sector organizations and brings a new methodological approach to measure the performance impact of IT.

Keywords: IT Value, U.S. State Governments, Translog Cost Function, Stochastic Frontier

Suggested Citation

Pang, Min-Seok and Tafti, Ali R. and Krishnan, Mayuram S., Information Technology and Administrative Efficiency in U.S. State Governments - A Stochastic Frontier Approach (May 19, 2011). Available at SSRN: https://ssrn.com/abstract=1612820 or http://dx.doi.org/10.2139/ssrn.1612820

Min-Seok Pang (Contact Author)

Temple University - Department of Management Information Systems ( email )

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Floor 2
Philadelphia, PA 19128
United States
215-204-3059 (Phone)

HOME PAGE: http://sites.google.com/site/minspang

Ali R. Tafti

University of Illinois at Chicago ( email )

601 S Morgan St, 2403 University Hall, MC 294
Chicago, IL 60607
United States

Mayuram S. Krishnan

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-6749 (Phone)

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